With _______ prices rise in the first sector, remain the same in the second and increase overall?
Correct answer: A. ratchet inflation
- A. ratchet inflation
- B. inflationary expectations
- C. import substitution
- D. demand pull inflation
Explanation
Ratchet inflation describes a price level that rises when demand increases but does not fully fall when demand later weakens, so prices remain higher overall. The price movement therefore resembles a ratchet that moves upward more easily than downward.
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